This week I am looking at Impax Environmental Markets (IEM), an investment trust which invests in companies from across the globe that are involved in developing cleaner or more efficient energy, water and waste services. The trust aims to benefit from creating a more sustainable world and concentrates on the structural themes of growing populations, increasing urbanisation, rising consumption and the depletion of limited natural resources.
Impax Asset Management has been investing with this approach since 1999 and has accumulated a total of £9bn in assets focusing on their environmental theme. IEM was launched in 2002 and has since increased to be c£490m in size and comfortably the largest trust in the sector.
This trust looks to find companies that generate over 50% of their underlying revenues by sales of environmental products or services in the energy efficiency, renewable energy, water, waste and sustainable food and agriculture markets. Back in 1999 around 250 companies would have qualified but today their universe is over 2,000 companies. The Impax team look to build a portfolio of the 60 most attractive stocks.
Environmental, Social and Governance (ESG) focussed investing has surged over recent years. Demand for more responsible investing has seen total ESG equity mandated assets across Europe rise from €85bn in 2010 to €233bn in February this year. Despite this, Impax feels that the sector is still vastly under-researched, with the result that companies are often mispriced, leading to good opportunities for the team.
However, the recent rise in demand for ESG investing has seen the shares move from a 10% discount to Net Asset Value this time last year to a 1% premium, making it vulnerable to any setback in the market.